The former McDiarmid Park full-back was hired last summer to replace Tommy Wright and led the Perth side to the greatest single campaign in their history, winning both the League Cup and Scottish Cup and finishing in fifth place in the Scottish Premiership table.
There was speculation that Davidson could attract interest from a number of clubs down south this summer given his achievements, but he insists he remains happy and committed to St Johnstone.
He told the club’s website: "I'm absolutely delighted. This football club has been a massive part of my life and to know that I will be for a few more years is very pleasing.
"What we achieved last season was absolutely fantastic and we now look to build on that as we all move forward together.
"I have a great backroom staff and a great bunch of lads in the playing squad. They have all been fantastic.
"Everybody in the football department, and all around the club, will continue to give their all as we look to keep moving forward and doing as well as we possibly can."
Supporters were recently unhappy with their club for selling both captain Jason Kerr and prized-asset Ali McCann on transfer deadline day.
Chairman Steve Brown later explained the decision in a statement and assured supporters the money would be invested back into the team. He says today’s news is “the start of that process”.
He added: "Callum is the most successful manager in our history and one of the finest young managers in British football. We are all delighted he has signed this new contract.
"When I appointed him last summer I told him he'd be given time to develop as a manager and he excelled in that environment. This long-term deal will allow him to develop further, knowing that he has the full backing of everyone at the football club.
"We have great unity at St Johnstone and we are together as we try our best to give what our supporters deserve.
"I said last week that we'd reinvest in the football department. Today is the start of that process.”